Is Business Credit Based on Personal Credit?

Business loans are like fuel for your entrepreneurial journey. By intelligently leveraging them, you can propel your vision forward and conquer new horizons.” - Daymond John

The short answer? No.

Business credit refers to the credit profile and history that's established by your business.

Personal credit refers to your consumer credit history. Pretty self explanatory - personal purchases, mortgages, auto loans, personal credit cards. But because business credit it SEPARATE, a Personal Guarantee is not generally needed for approval.

What do Lenders Take into Account?

Well other factors during the approval process such as:

Time in Business, Revenue and Business Finances as a whole.

As you build your business credit, your'e evaluated as a stand-alone entity based on your commercial lending relationships.

Of Course, FIRST! You Make Sure Your Foundation is in Check!

Before anything, this is an important step. Don't skip ahead of yourself if your foundation isn't in check because you'll only end up backtracking and wasting time.

WHY? Because you just can't build standalone business credit if you're not fully separated from your entity. The more credit you apply for, and pay back responsibly (that's a a big word - gotta be responsible). It's a win across the board.

It's how you get approved for vendor credit, retail credit and revolving business credit cards. Even vehicle financing without ever touching your personal credit and without providing any kind of personal guarantees that hold you personally liable to your debts that occur in the business.

WHAT IF YOU DON'T HAVE BUSINESS CREDIT OR YOU'RE JUST STARTING TO BUILD IT?

I'M GLAD YOU ASKED! (stick with me because I'm going to give you everything you need to do to get started with the initial business credit, step-by-step).

But first, i have a question....Are You Using Personal Finances to Fund Your Business?

Pretty simple question but unfortunately, depending on your answer, there's a lot of things that come with it, so oftentimes, owners rely on personal guarantees. Especially in the starting days right? Sometimes that personal guarantee is the deciding factor of you getting that funding.

But many believe that they'll simply use personal credit or other sources of personal finances until the business brings in enough revenue and profit to actually sustain itself. Listen - unfortunately "businesses be businessing" (lol) right? Things happen and this is whre business owners fall short.

The unexpected happens all the time.

ACCORDING TO THE BUREAU OF LABOR STATISTICS

• Nearly half of businesses fail in the first 5 years
• And 65% close their doors within the first 10 years

If you're a business owner, an entrepreneur, then you've probably heard this statistic before right? Unfortunately that statistic is pretty common business.

BUT do you know what the number one reason why businesses fail? The number one driving reason?

It's simply just a lack of capital...or access to funds. IT'S CASH FLOW GUYS!

Not only do businesses run out of cash, they also struggle to access the money they need when they need it the most.

THAT WAS JUST A 30,000 FOOT OVERVIEW.

Let's take a deep dive and a closer look to actually understand what's really going on and what CAUSES BUSINESSES TO SLOWLY RUN OUT OF CASH OR GAIN ACESS TO FUNDING:

With that said, here are 10 reasons Why Businesses Run Out of Cash! ??

With that said, here are 10 reasons Why Businesses Run Out of Cash! ??

1. High interest rates. Plain and simple.

On personal credit cards and loans make financing costs quite expensive over? long periods of time and this cuts into your profit and cash flow. This cuts into your dreams, goals and aspirations and everything else your business might have.

2. Credit Limits

Personal credit lines have limits. This is common facts right? Generally speaking, not enough to actually cover those reoccurring business expenses much less fund your actual growth! That's way more expensive.

So running up against your personal limits not only interrupts operations but it damages your personal credit along the way due to that high, high utilization.

Unlike personal credit, utilization isn't a factor so it doesn't affect your personal credit score.

3. Personal Assets

Using personal assets like a home as collateral (like a HELOC) is incredibly risky if a business?fails. Defaulting could literally mean you lose your home. Or whatever personal asset you put towards.?

4. Maxing Out Your Credit

This lowers your personal? credit score making it WAY harder to access personal loans and credit while also increasing those rates and fees that you'll be paying and there's no way around that.

5. Personal Credit Utilization

We touched on this just a little but...tapping all personal credit leaves NO emergency backup funds if the business hits a rough patch. And the business WILL hit a rough patch. It's never a matter of IF but a matter of WHEN thus further increasing your risk of failing.

So likewise if you need to take out a loan or credit card?for personal emergencies,?your ability to do so is just wiped significantly.

6. No Tax Credits

So debt repayments on personal credit doesn't affect taxes at all. It's not tax deductible even in the slightest bit. But business loans interest costs ARE, effectively costing you more money to run.

Just another fee out of pocket.

7. Denials and Bad Terms

If a creditor feels that personal funds are being used to fund a business unsustainably this can absolutely cause you to get denied and it will also determine the rates, the terms.

Plus all the fess that you'll end up paying if you do get approved.?

8.The Inability to Reinvest in Growth?

So high interest rate payments reduce that capital that you have available that you can reinvest in growth and resources for your business.

Which can hit hard in the long-term.

9.That Over risk of Default

We also touched on this. Over reliance on personal finance puts you in this hole you have to CLIMB out of sometimes but unfortunately if you fall, that can wipe out quite a lot. Your homes, your car everything...

10. Lack of Cash Flow Reserves

Number one reason why businesses fail we talked about is...cash flow. Money.

And the fact that successful businesses are NOT built on unsustainable debt. It's that simple.?

COMPARING PERSONAL CREDIT TO BUSINESS CREDIT

...Is comparing apples to oranges. It's completely?different.?

Unlike personal credit, business credit can be leveraged to provide HUGE returns on investment, it protects your cash flow, you get access to capital AND it also builds the VALUE of your business.

In real time, short-term, long-term, and all the in-between. All the while, of course, increasing sales an profits you can turn around and re-invest to grow.

IN MOST CASES USING PERSONAL FINANCES TO SURVIVE AND GET BY...

...will soon run its course. It's just that simple and make it nearly impossible to recover while running and growing your business.?

This is because as the business grows, it's going to require more funding at each?stage of growth. And personal credit is just that. It has a limit, it has a line. It has a ceiling and it's much shorter than you may think.

HOLD UP! THIS MESSAGE ISN'T MEANT TO BE FEAR BASED?

I'm not trying to scare you! I'm here to be honest and tell you what we're seeing here at DominoFX Group and what our underwriters and partners are seeing. This message isn't meant to be fear based. It's meant to be a wake up call based off what we see reoccurring

WITHOUT BUSINESS CREDIT...?

Many business owners find that?they?dig themselves a hole. It's that simple. Then they get stuck?working?IN their business compared to working ON their?business.

So running up against your personal limits not only interrupts operations but it damages your personal credit along the way due to that high, high utilization.

Maybe that might be a reoccurring feeling, you yourself as a business owner, might've had. Living paycheck to paycheck?and working IN your business is significantly different than working ON your business.?And?we all know that is?likely?NOT the vision you had in mind when?you were starting?your?business...

Some of you started cause you wanted that dream home

Or that dream car

Or to pay off your kid's college tuition

Or to be able to retire comfortably.

Or just to live OK financially

There's a thousand reasons why people start businesses every day.

YOU MAY BE A FOUNDER WITH AN INNOVATIVE NEW IDEA THAT YOU KNOW CAN PENETRATE AND IMPACT THE MARKET. IT'S A SELF GOAL RIGHT ?

And leveraging business credit to grow helps you get out of that DREAM and into that dream car or having that?comfort in life.

Now there's something else that you may be wondering about which is...do you need to use personal credit to help build business credit??

This is an EXTREMELY common question I get pretty much daily and the short answer here is NO.

Any business can get approved for vendor credit in the business' name ONLY without any established business credit whatsoever.

These vendor accounts are starter accounts that report your payment? history to the business credit bureaus to actually help you to establish a business credit score and a business credit profile. That's why it's called starter accounts. It's designed for the start

YOU CAN EASILY BUILD BUSINESS CREDIT

HOW? By simply putting products and services you already use on that business credit account and then make your payments on time.

All you need to do are a set of things. Here's a few:

• Set up your foundation
• Vendor credit, retail credit and business credit can all be obtained by just your EIN number without a personal credit check, a personal guarantee or anything like that.?
• Phone services utility services, insurance policies, even leases obtained in your business' name can all be used to build your business credit as you make payments each month and then?business revenue lending and equipment financing and vehicle financing and MCAs they can all leverage your business data rather than your consumer credit score.?

And once credit is established...

Strong business credit makes securing more approvals, high limits, lower rates and better terms easy.

All the good stuff we all hope and want without relying on that personal credit EVERY time you need capital for your business.

If there's ONE THING...ONE TRUTH... I want you to take away that you probably didn't know...

We often encounter businesses with revenues of 3Million, 5 Million, even 10 Million in a state of panic. This is not an over-exaggeration, this is factual. They've bene denied a loan or a credit line or worse, they're existing credit line has just been abruptly revoked due to perceived damage on their business credit quality.

HOWEVER, upon further investigation into this, it's not necessarily bad business credit, but rather the absence of business credit history to begin with.

In the realm of business credit scoring, the 3 big bureaus - they assign failing scores simply because a business exists with any credit history and in essence having no credit is a massive deal. It penalizes you.

And the reality is...

Building business credit isn't really an option. It's an absolute necessity. And without establishing that business credit as your business grows, obtaining term loans or an SBA loan or whatever it may be, becomes increasingly difficult due to that poor or no business?credit score.?

And compounding this issue is that fact that 90% of credit issuers FAIL to report credit transactions to the relevant agencies. And this means that for every 10 credit issuers only 1 is reporting your payment, significantly impacting your credit profile.?

So prior to applying for credit...

It's IMPERATIVE to inquire whether the lender is actually reporting those transactions to the busines credit agencies and which agencies they report to.

This information is vital to establish before proceeding with any kind of application. And remember. Ask questions. You have to ask otherwise it's just wasted time on your end.

Business Credit Isn't Some Novel Concept

Did you know:

• It has existed long before consumer credit became what it is today.?
• Giants like Apple, Google, Meta, Walmart and everything in between, have leveraged?business credit lines to achieve their colossal success
• By mastering the art?of building business credit, you're able to very strategically grow your business.
• And also follow in the footsteps of some of the world's largest corporations ever known to the history of modern day.?

This isn't some pipe dream! This is obtainable, this is realistic. It happens every single day.?It's something you have to be doing to reach the kind of success that you want and frankly,

you deserve it.

RESOURCES TO HELP YOU GET STARTED

??Founders! Want to skyrocket your business growth? ??

Here is a quick checklist to get you started

• SHARE THE DOMINO EFFECT. Hey. Don’t keep us a secret. Subscribe and Share YouTube.
• Schedule Your Funding Planning Session: ?https://plan.dominofxgroup.com/
• Claim Your Business Credit Building Guide: ?https://financeguide.dominofxgroup.com/
• Hey, Women of Impact! ?? Do you have a business you're passionate about building? We've got something tailor-made for female founders like YOU.
• Our newsletter is your one-stop hub for exclusive pitch events, essential business growth resources, and insider tips and tricks to catapult your company to new heights. ?? From the part-time entrepreneur to the seasoned business owner, we've got insights and opportunities for everyone. Don't let the next big thing pass you by.
• ?? ?? Subscribe now and join our tribe of trailblazing women in business. Elevate your entrepreneurial game. Your business deserves it. Let's conquer this journey, together.Business loans are like fuel for your entrepreneurial journey. By intelligently leveraging them, you can propel your vision forward and conquer new horizons.” - Daymond John

The short answer? No.

Business credit refers to the credit profile and history that's established by your business.

Personal credit refers to your consumer credit history. Pretty self explanatory - personal purchases, mortgages, auto loans, personal credit cards. But because business credit it SEPARATE, a Personal Guarantee is not generally needed for approval.

What do Lenders Take into Account?

Well other factors during the approval process such as:

Time in Business, Revenue and Business Finances as a whole.

As you build your business credit, your'e evaluated as a stand-alone entity based on your commercial lending relationships.

Of Course, FIRST! You Make Sure Your Foundation is in Check!

Before anything, this is an important step. Don't skip ahead of yourself if your foundation isn't in check because you'll only end up backtracking and wasting time.

WHY? Because you just can't build standalone business credit if you're not fully separated from your entity. The more credit you apply for, and pay back responsibly (that's a a big word - gotta be responsible). It's a win across the board.

It's how you get approved for vendor credit, retail credit and revolving business credit cards. Even vehicle financing without ever touching your personal credit and without providing any kind of personal guarantees that hold you personally liable to your debts that occur in the business.

WHAT IF YOU DON'T HAVE BUSINESS CREDIT OR YOU'RE JUST STARTING TO BUILD IT?

I'M GLAD YOU ASKED! (stick with me because I'm going to give you everything you need to do to get started with the initial business credit, step-by-step).

But first, i have a question....Are You Using Personal Finances to Fund Your Business?

Pretty simple question but unfortunately, depending on your answer, there's a lot of things that come with it, so oftentimes, owners rely on personal guarantees. Especially in the starting days right? Sometimes that personal guarantee is the deciding factor of you getting that funding.

But many believe that they'll simply use personal credit or other sources of personal finances until the business brings in enough revenue and profit to actually sustain itself. Listen - unfortunately "businesses be businessing" (lol) right? Things happen and this is whre business owners fall short.

The unexpected happens all the time.

ACCORDING TO THE BUREAU OF LABOR STATISTICS

• Nearly half of businesses fail in the first 5 years
• And 65% close their doors within the first 10 years

If you're a business owner, an entrepreneur, then you've probably heard this statistic before right? Unfortunately that statistic is pretty common business.

BUT do you know what the number one reason why businesses fail? The number one driving reason?

It's simply just a lack of capital...or access to funds. IT'S CASH FLOW GUYS!

Not only do businesses run out of cash, they also struggle to access the money they need when they need it the most.

THAT WAS JUST A 30,000 FOOT OVERVIEW.

Let's take a deep dive and a closer look to actually understand what's really going on and what CAUSES BUSINESSES TO SLOWLY RUN OUT OF CASH OR GAIN ACESS TO FUNDING:

With that said, here are 10 reasons Why Businesses Run Out of Cash! ??

With that said, here are 10 reasons Why Businesses Run Out of Cash! ??

1. High interest rates. Plain and simple.

On personal credit cards and loans make financing costs quite expensive over? long periods of time and this cuts into your profit and cash flow. This cuts into your dreams, goals and aspirations and everything else your business might have.

2. Credit Limits

Personal credit lines have limits. This is common facts right? Generally speaking, not enough to actually cover those reoccurring business expenses much less fund your actual growth! That's way more expensive.

So running up against your personal limits not only interrupts operations but it damages your personal credit along the way due to that high, high utilization.

Unlike personal credit, utilization isn't a factor so it doesn't affect your personal credit score.

3. Personal Assets

Using personal assets like a home as collateral (like a HELOC) is incredibly risky if a business?fails. Defaulting could literally mean you lose your home. Or whatever personal asset you put towards.?

4. Maxing Out Your Credit

This lowers your personal? credit score making it WAY harder to access personal loans and credit while also increasing those rates and fees that you'll be paying and there's no way around that.

5. Personal Credit Utilization

We touched on this just a little but...tapping all personal credit leaves NO emergency backup funds if the business hits a rough patch. And the business WILL hit a rough patch. It's never a matter of IF but a matter of WHEN thus further increasing your risk of failing.

So likewise if you need to take out a loan or credit card?for personal emergencies,?your ability to do so is just wiped significantly.

6. No Tax Credits

So debt repayments on personal credit doesn't affect taxes at all. It's not tax deductible even in the slightest bit. But business loans interest costs ARE, effectively costing you more money to run.

Just another fee out of pocket.

7. Denials and Bad Terms

If a creditor feels that personal funds are being used to fund a business unsustainably this can absolutely cause you to get denied and it will also determine the rates, the terms.

Plus all the fess that you'll end up paying if you do get approved.?

8.The Inability to Reinvest in Growth?

So high interest rate payments reduce that capital that you have available that you can reinvest in growth and resources for your business.

Which can hit hard in the long-term.

9.That Over risk of Default

We also touched on this. Over reliance on personal finance puts you in this hole you have to CLIMB out of sometimes but unfortunately if you fall, that can wipe out quite a lot. Your homes, your car everything...

10. Lack of Cash Flow Reserves

Number one reason why businesses fail we talked about is...cash flow. Money.

And the fact that successful businesses are NOT built on unsustainable debt. It's that simple.?

COMPARING PERSONAL CREDIT TO BUSINESS CREDIT

...Is comparing apples to oranges. It's completely?different.?

Unlike personal credit, business credit can be leveraged to provide HUGE returns on investment, it protects your cash flow, you get access to capital AND it also builds the VALUE of your business.

In real time, short-term, long-term, and all the in-between. All the while, of course, increasing sales an profits you can turn around and re-invest to grow.

IN MOST CASES USING PERSONAL FINANCES TO SURVIVE AND GET BY...

...will soon run its course. It's just that simple and make it nearly impossible to recover while running and growing your business.?

This is because as the business grows, it's going to require more funding at each?stage of growth. And personal credit is just that. It has a limit, it has a line. It has a ceiling and it's much shorter than you may think.

HOLD UP! THIS MESSAGE ISN'T MEANT TO BE FEAR BASED?

I'm not trying to scare you! I'm here to be honest and tell you what we're seeing here at DominoFX Group and what our underwriters and partners are seeing. This message isn't meant to be fear based. It's meant to be a wake up call based off what we see reoccurring

WITHOUT BUSINESS CREDIT...?

Many business owners find that?they?dig themselves a hole. It's that simple. Then they get stuck?working?IN their business compared to working ON their?business.

So running up against your personal limits not only interrupts operations but it damages your personal credit along the way due to that high, high utilization.

Maybe that might be a reoccurring feeling, you yourself as a business owner, might've had. Living paycheck to paycheck?and working IN your business is significantly different than working ON your business.?And?we all know that is?likely?NOT the vision you had in mind when?you were starting?your?business...

Some of you started cause you wanted that dream home

Or that dream car

Or to pay off your kid's college tuition

Or to be able to retire comfortably.

Or just to live OK financially

There's a thousand reasons why people start businesses every day.

YOU MAY BE A FOUNDER WITH AN INNOVATIVE NEW IDEA THAT YOU KNOW CAN PENETRATE AND IMPACT THE MARKET. IT'S A SELF GOAL RIGHT ?

And leveraging business credit to grow helps you get out of that DREAM and into that dream car or having that?comfort in life.

Now there's something else that you may be wondering about which is...do you need to use personal credit to help build business credit??

This is an EXTREMELY common question I get pretty much daily and the short answer here is NO.

Any business can get approved for vendor credit in the business' name ONLY without any established business credit whatsoever.

These vendor accounts are starter accounts that report your payment? history to the business credit bureaus to actually help you to establish a business credit score and a business credit profile. That's why it's called starter accounts. It's designed for the start

YOU CAN EASILY BUILD BUSINESS CREDIT

HOW? By simply putting products and services you already use on that business credit account and then make your payments on time.

All you need to do are a set of things. Here's a few:

• Set up your foundation
• Vendor credit, retail credit and business credit can all be obtained by just your EIN number without a personal credit check, a personal guarantee or anything like that.?
• Phone services utility services, insurance policies, even leases obtained in your business' name can all be used to build your business credit as you make payments each month and then?business revenue lending and equipment financing and vehicle financing and MCAs they can all leverage your business data rather than your consumer credit score.?

And once credit is established...

Strong business credit makes securing more approvals, high limits, lower rates and better terms easy.

All the good stuff we all hope and want without relying on that personal credit EVERY time you need capital for your business.

If there's ONE THING...ONE TRUTH... I want you to take away that you probably didn't know...

We often encounter businesses with revenues of 3Million, 5 Million, even 10 Million in a state of panic. This is not an over-exaggeration, this is factual. They've bene denied a loan or a credit line or worse, they're existing credit line has just been abruptly revoked due to perceived damage on their business credit quality.

HOWEVER, upon further investigation into this, it's not necessarily bad business credit, but rather the absence of business credit history to begin with.

In the realm of business credit scoring, the 3 big bureaus - they assign failing scores simply because a business exists with any credit history and in essence having no credit is a massive deal. It penalizes you.

And the reality is...

Building business credit isn't really an option. It's an absolute necessity. And without establishing that business credit as your business grows, obtaining term loans or an SBA loan or whatever it may be, becomes increasingly difficult due to that poor or no business?credit score.?

And compounding this issue is that fact that 90% of credit issuers FAIL to report credit transactions to the relevant agencies. And this means that for every 10 credit issuers only 1 is reporting your payment, significantly impacting your credit profile.?

So prior to applying for credit...

It's IMPERATIVE to inquire whether the lender is actually reporting those transactions to the busines credit agencies and which agencies they report to.

This information is vital to establish before proceeding with any kind of application. And remember. Ask questions. You have to ask otherwise it's just wasted time on your end.

Business Credit Isn't Some Novel Concept

Did you know:

• It has existed long before consumer credit became what it is today.?
• Giants like Apple, Google, Meta, Walmart and everything in between, have leveraged?business credit lines to achieve their colossal success
• By mastering the art?of building business credit, you're able to very strategically grow your business.
• And also follow in the footsteps of some of the world's largest corporations ever known to the history of modern day.?

This isn't some pipe dream! This is obtainable, this is realistic. It happens every single day.?It's something you have to be doing to reach the kind of success that you want and frankly,

you deserve it.

??Founders! Want to skyrocket your business growth? ??

Here is a quick checklist to get you started

• SHARE THE DOMINO EFFECT. Hey. Don’t keep us a secret. Subscribe and Share YouTube.
• Schedule Your Funding Planning Session: ?https://plan.dominofxgroup.com/
• Claim Your Business Credit Building Guide: ?https://financeguide.dominofxgroup.com/
• Hey, Women of Impact! ?? Do you have a business you're passionate about building? We've got something tailor-made for female founders like YOU. Our newsletter is your one-stop hub for exclusive pitch events, essential business growth resources, and insider tips and tricks to catapult your company to new heights. ?? From the part-time entrepreneur to the seasoned business owner, we've got insights and opportunities for everyone. Don't let the next big thing pass you by.
• ?? ?? Subscribe now and join our tribe of trailblazing women in business. Elevate your entrepreneurial game. Your business deserves it and the key is collaboration.